What if I buy or sell 'off the plan'?
The term buying or selling "off the plan" means entering into a contract to purchase a property or selling a property prior to registration of the plan.
The main advantages to buying off the plan are:
- savings on duty, as duty is calculated on the value of the property (land and any buildings) at the date of the contract;
- possible tax benefits such as depreciation;
- the purchaser is able to acquire a property at the market price prior to completion, which may be lower than the market at completion;
- the purchaser may be able to select the fittings for the home subject to the contract; and
- the purchaser will have extra time to save money for future mortgage repayments as a deposit will be required at the time of signing the contract but the balance will usually only be required once construction is complete.
The advantages to selling off the plan are that the developer can raise capital for the project and continue development with the surety of a certain number of sales.
Off the plan sales are more complicated for both the buyer and seller. The Sale of Land Act 1962 creates a number of obligations for a vendor selling off the plan. These include disclosure of additional information not otherwise required. A purchaser buying off the plan should also read their contracts carefully and ensure they understand its conditions, as they will generally be longer and more complicated than a standard contract. If the contract relates to the sale of a house to be constructed, a certificate of insurance for defects may also be required to be provided.
